The Competition Becomes Like a Parasite, Living off the Credit Union

I know you have seen those irritating commercials for mystery organization ING. You know, the ones that feature the orange ING Direct logo on a park bench, and two people are looking at it and one says “what is that?” and it leads to an explanation of the e-bank while some strange occurrence is happening right behind the park bench. The organization seems not very well focused on television, and hard to determine what it is and does it not easy from the commercials, but the attention getter is the rate paid on the savings………..

3.8% APY

If you are like me, you say to yourself “This is too good to be true.” One night, as I surfed the net I took about 15 minutes to figure out how this works, and the premise is interesting, and more than parasitic to traditional financial institutions.

You can open an account with this bank right online. I know what you are thinking – fill out a form and send it in, no one will never want to go through that hassle. Truth is, there is not form to fill out and send in unless you want to. Within 10 minutes I had set up my online account with ING and its funding source is my credit union account

Here is how it works:

o       You complete an e-form that is an application, with name, SSN and all the info you would expect.

o       Next you include the information of your current bank, credit union, or money market fund, with the routing and transit number and your account number, directly off of your checkbook (they walk you through it so you can do it even if you’ve never heard of a routing and transit number.)

o       Next, you submit and amount to be deducted, and they agree to deduct it as soon as you do one interesting thing – just like registering for PayPal - they send you a small amount of money for deposit into your bank or credit union account. Mine was .14 cents

o       You have 2 weeks in order to go back to the ING website with your account number and password and verify the amount they sent you. I logged in, verified the .14 cents and the $500 I had decided to test this with came out of my account and went to ING Direct. It was that simple.

Now, you are saying, where is the catch? I can’t yet find one. The account is fee free. The account does not come with a minimum deposit. There will undoubtedly be marketing of the many other ING products, which seem to focus on mortgages of all types. The advertising focuses on encouraging you to save, and is actually paying a rate you might be tempted to utilize as more than a parking place for money. There is no apparent fee to move money from your credit union account to your ING Direct account and visa versa.

I went back this morning to the website and the sale for “new money” brought into the account is 4.75% over the next few months.

ING is using other financial institutions to build the branches, to staff the teller counters, to take the deposits, and then luring consumers to save with them via a quick and cheap electronic transfer that costs them pennies. The rates are clearly above market. The funds are FDIC insured.

I am a firm believer that credit union leaders have a responsibility to constantly check the competition. This competition is unique – it doesn’t seem to want to compete head to head on being “street corner” convenient, but it does want to siphon money right out of your member’s checking accounts and then market to them. The funny things so far is that I opened my account about 3 weeks ago and haven’t yet had an e-mail or mailing come to the house. Maybe that will happen with a first statement – I’ll up date you with that in future postings.

In the meantime, take some time this week to go to the website of a major banking competitor and look at the site as a consumer, and see it how easy it is to use, and how the competitor’s ease of use compares to yours.  Credit unions have to rethink competition and convenience every day through the eyes of our member owners, and from the eyes of potential members that DON’T become members. Remember, the competition is always an adversary, it can be a parasite too!